Blow to short-term savers as banks make it harder to get the top deals

Savers with smaller deposits are being cut off from the best short-term bond deals as the amount needed to access them skyrockets.

The top five one-year bond rates all require deposits ranging from £1,000 to £10,000, whereas three months ago a typical deal asked for between £1 and £1,000.

For example, the current top one-year bond, from Smart Save, pays 1.95pc but requires a £10,000 deposit, according to savings firm Moneyfacts. The second-best rate, Wyeland Bank’s 1.88pc, is only accessible to those with £5,000.

Two of the remaining three one-year bonds in the best-buy table ask for £1,000 deposits, and one for £10,000.

Savers needed far less to get the best rates even three months ago. In early June, the best 12-month bond, from Metro Bank, paid 2pc and required £500 to open. In second place was a 1.93pc deal from Atom Bank that asked for a minimum deposit of just £50.

The reason the top bond rates demand higher deposits is that a different set of banks are now dominating the best-buy tables.

For most of this year, the best deals came from larger challenger banks such as Metro, Atom and Masthaven, all of whom tended to ask for smaller deposits. 

Now, the best rates are from a different set of banks – a mix of smaller challengers and established but small banks such as Arbuthnot. These firms tend to ask for bigger bond deposits than their larger peers, so as not to be overwhelmed with business.

When banks design bonds, they know how much cash they want to be deposited with them, and have plans for how to reinvest that cash to make their own profits.

Being swamped by savers can upset these plans and create extra administration costs, so some banks control demand for their deals by paying lower rates or raising minimum deposit levels.

Rachel Springall, of financial experts Moneyfacts, said: “Their deposit levels will entirely depend on how much money they want to generate for their business, and for how long.” 

Big banks are getting away with paying lower saving rates generally because they rely on consumer apathy towards switching.